Sword or shield? : the impact of WTO law on the extraterritorial effect of sanitary and phytosanitary measures

Abstract

Domestic regulatory standards can migrate to other jurisdictions via trade. This ‘extraterritorial effect’ has been most frequently demonstrated with the exportation of the typically more stringent European Union (EU) regulations to other countries. The EU’s trading partners often involuntarily ‘trade up’ and adopt EU regulations in order to access its market. The extraterritorial effect is subject to the rules of the World Trade Organization (WTO). It has been argued that the WTO can constrain this extraterritorial effect primarily through the enforcement of its rules in the dispute settlement system. However, scholars have argued that WTO rules can in fact shield the extraterritorial effect against retaliation and cannot easily declare extraterritorial measures as incompliant if they are not discriminatory. These characterizations of WTO law are arguably simplified and do not address the technicalities of WTO law. This dissertation therefore examined WTO rules on the extraterritorial effect of measures in a technical, nuanced manner by systemically analysing provisions and applications of WTO law. The focus of the analysis is on the understudied area of sanitary and phytosanitary (SPS) measures. The central research question this dissertation answers is: In what ways does WTO law constrain or enable the extraterritorial effect of domestic sanitary and phytosanitary (SPS) measures? The three sub-questions to address this question are: 1) How does the extraterritorial effect of SPS measures impact trade partners in practice?, 2) How is SPS law applied and interpreted as a ‘sword’ or ‘shield’ by the WTO Dispute Settlement Body (DSB)?, and 3) How do international regulatory standards influence the extraterritorial effect of SPS measures? It was observed that the extraterritorial effect does occur in the SPS sector, and its scope is broader than originally thought, i.e. both developed and developing countries enact measures with an extraterritorial effect. This research found that WTO laws both constrain and facilitate the extraterritorial effect of measures. The uncertainty surrounding the science requirement is used as the main ‘shield’ for extraterritorial measures and international standards are the main ‘sword’ for challenging such measures. It is recommended that further science-based international standards, guidelines and recommendations be developed as they were found to be a powerful tool in challenging measures with an extraterritorial effect. The WTO should regulate the organizations that set these standards to ensure that they are impartial. Additionally, it concludes that the WTO should develop a normative standard for science in the SPS Agreement in order to limit the use of extraterritorial measures shielded as a scientific necessity.